Spurious Regression-An Example

Data Generation Process• new;• format /m1 /rd 9,3;• apha=3; beta=1;• T=100;

• Y=zeros(T,1);• X=zeros(T,1);• e1=Rndn(T,1);• e2=Rndn(T,1);

• @ Data Generation Process @

• Y[1,1]=0; X[1,1]=0;

• i=2;• do until i>T;

• Y[i,1]=apha+beta*Y[i-1,1]+4*e1[i,1];• X[i,1]=apha+beta*X[i-1,1]+2*e2[i,1];

• i=i+1;• endo;

• Output file=d:\Enclass\Spus\level.out reset;

• Y~X;

• Output off;

• Output file=d:\Enclass\Spus\Diff.out reset;

• (Y[2:100,1]-Y[1:99,1])~(X[2:100,1]-X[1:99,1]);

• Output off;